A new report forecasts that Northern Virginia’s 2013 economy will decline from last year’s tepid 3% growth to 2.8%, as the United States confronts a “New Normal”, with growth much slower than recoveries from previous recessions. Developers, however, still see a demand for properly priced, new homes, as seen around Ashburn and Brambleton.
In its January Greater Washington Economic Conference, George Mason University’s Center for Regional Analysis predicted a smaller and aging Federal workforce, fewer domestic and international migrants to the area, and younger and lower paid workers filling the “New Normal”, new jobs. Hundreds of investors, builders, lenders, and realtors-including this writer-listened in rapt attention as Dr. Stephen Fuller presented his 21st annual report covering the next five years.
Daily we experience or see the clogged roads that affirm that the health of the Fairfax and Arlington economy affects the housing market as far away as western Loudoun/Round Hill/Middleburg. Significant numbers of Ashburn residents commute to DC, Reston, Fairfax, and Roslyn. Our homes and jobs are separated by hour-long commutes in Northern Virginia so when government agencies and companies near and inside the Beltway encounter economic woes or flat growth, consequences exist.
Unfortunately, Dr. Fuller and other conference speakers did not offer near-term hope. Not until 2014 will the Washington Area economy grow more than 3% and not until 2017, said a FANNIE MAE speaker, will median priced home values across the Nation reach their 2007 values.
Douglas Duncan, FANNIE’s Chief Economist, told us that “Housing is on firm footing, headed in the right direction, but not robust”. He also said that U.S. home ownership will continue to decline from its 2006 level of 69% to about 65%. Nationally, Duncan forecast GDP growth in 2013 of 2.2% and 2.4% in 2014. Not the best news for his audience, nor for local home buyers and sellers.
However, those who do want to buy homes will have many choices as single family home construction will increase in 2014-17 and the prices of existing homes are likely to undergo price compression due, if nothing else, to the law of supply and demand. Many of these new homes are in the Rt 7 and Rt 50 corridors around Ashburn, South Riding, Purcellville and Round Hill where to-be-built attached new homes are available for $3-500,000, and single family units for $5-700,000. Builders are setting price points that the “New Normal” buyers can afford with the current low mortgage rates.
Despite Northern Virginia’s very good December sales of 2,289 homes-up 5.39%, higher home selling prices -up 13.3% year over year, and a recent report by the National Association of Realtors that 2012 had the highest existing home sales in five years, the local Metropolitan Regional Information Service recently reported that “….several clues reveal a possible softening of demand in the near-term and new contracts have declined slightly for the 2nd straight month. Additionally,
unseasonable declines in sales and median price from November could be an early
sign of weakening demand.”
Explaining one contributor to the possible slowdown, GMU’s Fuller observed that despite the growing number of jobs in Northern Virginia, many will pay less. “It takes two jobs to equal the levels of income of 2007”, he said. Education and
healthcare, he reported, will have two thirds of the new jobs the next few years, with construction and the Federal workforce, which provided 39.8% of local jobs, declining.
In my own real estate business of helping Northern Virginia companies recruit out-of-area candidates, one major client has curtailed all hiring due to the Sequestration threat and another, one of the largest employers in Northern
Virginia, has reduced its six month executive recruiting plans to two positions
from more than ten in early 2012.
The GMU forecast indicates that the aging and retiring Federal workforce, the influx of younger and single workers who rent rather than buy, and the growing number of retiring Baby Boomers who are expected to downsize, will pressure the existing single family home market, especially the larger homes.
Conclusion: Don’t expect much price growth the next three years. If you want to sell your home, this year is as good as next year. If you are in the market for your first home, prices and mortgage rates are really good.
Next month: The Government’s new rules that significantly alter home mortgage terms and conditions and may reduce the number of mortgages issued.
James Atkins is President of Homes For Leaders Real Estate. firstname.lastname@example.org